Canada Gazette, Part I, Volume 158, Number 27: Order Declaring that the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations Do Not Apply in Saskatchewan, 2025

July 6, 2024

Statutory authority
Canadian Environmental Protection Act, 1999

Sponsoring department
Department of the Environment

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The current equivalency agreement between the Minister of the Environment and the Province of Saskatchewan, which forms the basis for the non-application of the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations (the federal Regulations) in the Province of Saskatchewan, is set to expire on December 31, 2024. The Minister of the Environment is recommending that the Governor in Council make an Order (the proposed Order) that would suspend the application of the federal Regulations in the province of Saskatchewan, effective January 1, 2025. The basis for the proposed Order is an equivalency agreement for which a notice of availability was published on June 7, 2024, in the Canada Gazette, Part I. This agreement confirms that the federal Regulations and Saskatchewan’s Management and Reduction of Greenhouse Gases (General and Electricity Producer) Regulations (Saskatchewan Electricity Regulations) will have an equivalent outcome in terms of greenhouse gas (GHG) emissions over the January 1, 2025, to December 31, 2026, period. The proposed Order would allow for the continuation of reduced regulatory overlap and administrative burden, allowing Saskatchewan to achieve equivalent GHG emission reductions in a manner that best suits its particular circumstances.

Background

Federal Regulations and amendments

In September 2012, the Government of Canada published the federal Regulations in the Canada Gazette, Part II.^{footnote 1} The federal Regulations establish an emission standard for coal-fired electricity generation of 420 tonnes of carbon dioxide per gigawatt-hour of electricity produced (t CO₂/GWh) from electricity generating units fuelled by coal, coal derivatives or petroleum coke. New units whose commissioning date is on or after July 1, 2015, became subject to the emissions standard immediately. Existing units, which were commissioned prior to July 1, 2015, were required to comply with the emissions standard after a period that ranges from 45 to 50 years of operation, depending on the unit’s commissioning date. On December 12, 2018, amendments to the federal Regulations were published in the Canada Gazette, Part II, to accelerate the phase-out of conventional coal-fired electricity generation by December 31, 2029. In August 2023, the Government of Canada published the proposed Clean Electricity Regulations (proposed CER) in the Canada Gazette, Part I, which proposed to introduce new limitations on GHG emissions from fossil fuel-based electricity generation starting in 2035.

Equivalency agreements under the Canadian Environmental Protection Act, 1999 (CEPA)

Protection of the environment is a shared jurisdiction between the Government of Canada and provincial governments. As a tool for minimizing regulatory duplication and offering flexibility in achieving equivalent policy outcomes, section 10 of the Canadian Environmental Protection Act, 1999 (CEPA) allows the Governor in Council, on the recommendation of the Minister of the Environment, to make an Order so that the provisions of the CEPA regulations that are the subject of an equivalency agreement do not apply in a province or territory. For this to occur, the province or territory must first enter into an equivalency agreement with the Minister of the Environment. An equivalency agreement is a written agreement entered into by the Minister of the Environment and the province or territory declaring that there are in force in the province or territory, laws containing provisions that are equivalent to the given federal regulation and laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under environmental legislation of the province or territory.

The Department of the Environment (the Department) has indicated that it is willing to consider developing equivalency agreements for GHG emission regulations with interested provinces and territories, in order to reduce regulatory overlap and provide greater flexibility for regulated sectors. In the case of GHG regulations, provincial or territorial laws are considered to be equivalent if they result in equivalent GHG emission outcomes, calculated in terms of carbon dioxide equivalent (CO₂e). In particular, GHG emissions under provincial or territorial regulations must be no greater than they would have been if the corresponding federal regulations had applied instead. This allows a province or territory to attain the GHG outcome that would have occurred under the federal Regulations in a way that best suits its particular circumstances.

Saskatchewan equivalency agreement and provincial policy

On November 22, 2016, the Department and Saskatchewan signed the Canada-Saskatchewan equivalency agreement in principle (AiP). The AiP provided a framework for the establishment of an equivalency agreement such that the federal Regulations will not apply in the province of Saskatchewan until after 2029, provided that the province achieves an equivalent outcome in terms of GHG emissions, through the implementation of its provincial electricity regulations. The AiP also indicated that equivalency with the federal Regulations could serve to inform equivalency with the amended federal Regulations to accelerate the phase-out of conventional coal-fired electricity generation.

On January 3, 2018, Saskatchewan published the Saskatchewan Electricity Regulations, which impose province-wide GHG emissions caps (hereafter referred to as caps) on most electricity generating facilities emitting annually greater than 10 kilotonnes (kt) of CO₂e, from 2018 to 2029. The caps are the maximum cumulative GHG emissions permitted from Saskatchewan’s electricity utility sector, and were established to ensure that the GHG emissions outcomes under the Saskatchewan Electricity Regulations will be equivalent to or better than those expected to occur under the federal Regulations.

An equivalency agreement between the Minister of Environment and Saskatchewan was entered into and published on May 11, 2019. The equivalency agreement provides Saskatchewan greater flexibility on future capital investment decisions in the electricity sector. In its published climate change strategy, Saskatchewan included a target to reduce SaskPower’s GHG emissions by at least 40% from the 2005 level by 2030. In support of this objective, the province planned to increase its non-emitting generation capacity up to 50% of its total generation capacity through increasing renewable energy (including wind and solar) sources, increasing imports of hydroelectricity from Manitoba and investigating the feasibility of energy storage services to expand renewable capacity. The province also planned to run two coal-fired units, Boundary Dam units 4 and 5 (BD4 and BD5), after December 31, 2019, which is their “end of useful life” date under the federal Regulations. In particular, BD4 was expected to run until December 31, 2021, while BD5 was expected to run until December 31, 2024. Operating these units longer would provide SaskPower (the province’s main electricity provider) with the flexibility to bring additional low- and non-emitting generation facilities online later, while achieving equivalent GHG outcomes over the entire period of the equivalency agreement. A non-emitting generation capacity target of 40–50% by 2030, along with milestones leading up to that date, was included as a condition in the equivalency agreement to align with Saskatchewan’s commitment.

A draft renewed equivalency agreement (proposed Equivalency Agreement) between the governments of Canada and Saskatchewan was published in the Canada Gazette, Part I, on June 7, 2024. The purpose of the proposed Equivalency Agreement is to continue to provide Saskatchewan greater flexibility on future capital investment decisions in the electricity sector, by suspending the federal Regulations in Saskatchewan for the 2025–2026 period. Under the proposed Agreement, the province plans to continue to run BD4 and BD5, which would have otherwise become subject to the performance standard under the federal Regulations. A non-emitting generation capacity target of 40–50% by 2030, along with milestones leading up to that date, is included as a condition in the proposed Equivalency Agreement to align with Saskatchewan’s commitment. To date, Saskatchewan’s GHG emissions levels under Saskatchewan’s regulatory regime since the coming into force of the previous agreement have been lower than or equivalent to the emissions levels expected under the federal Regulations.

It is important to note that modelling for the proposed Equivalency Agreement does not account for any potential impacts of early actions that may be induced by the proposed CER, as those regulations were not finalized prior to the development of the proposed Equivalency Agreement. It was determined that a two-year equivalency agreement (based on modelling conducted for the previous agreement showing equivalent outcomes for the 2025–2026 period) is preferable to ensure that robust modelling and analysis accounting for the impacts of the CER can be completed for future equivalency agreements that may arise prior to 2030.

Equivalent environmental outcomes

For the purpose of determining equivalent outcomes, in 2019, the Department modelled the GHG emission levels of the electricity sector from 2018 to 2029 in Saskatchewan under the federal Regulations. These cumulative GHG emissions were compared with the cumulative GHG emissions allowed under the provincial regulatory regime and were determined to be equivalent.

Assumptions underlying electricity demand growth modelling included factors such as projections of growth and operational modernization in industrial sectors such as the potash industry, efficiency improvements in residential buildings, changes in the number of households, and consideration of SaskPower’s demand growth projections. Saskatchewan set the electricity sector emission caps under its regulations to reflect the outcome of this modelling exercise.

The Department’s analysis, using the 2019 ECCC modelled GHG emission levels, finds that the Saskatchewan Electricity Regulations are equivalent to the federal Regulations over the 2018–2026 period, as summarized in Table 1.

Table 1: Comparison of GHG emissions under federal and provincial electricity regulatory regimes (in megatonnes of CO₂e)

Jurisdiction	Data source	2018–2019	2020–2022	2023	2024	2025–2026	Cumulative 2018–2026
Federal	Modelled emissions under federal Regulations	33.7 table 1 note b	42.9 table 1 note b	14.5 table 1 note b	14.6 table 1 note b	29.4 table 1 note b	135.1
Provincial	Provincial Actuals and Emissions Caps	31.7 table 1 note c	41.0 table 1 note c	13.6. table 1 note c	13.6 table 1 note d	29.4 table 1 note d	129.3
Difference table 1 note a	N/A	1.9	1.9	0.9	1.0	0.0	5.8
Table 1 note(s) Table 1 note a A positive difference represents an "over achievement", while a negative difference represents an "emission deficit". Totals may not add up due to rounding. Return to table 1 note a referrer Table 1 note b Federal baseline emissions determined by the previous equivalency agreement to have been equivalent to the federal Regulations. Return to table 1 note b referrer Table 1 note c Historical provincial emissions Return to table 1 note c referrer Table 1 note d Saskatchewan forecasted emissions Return to table 1 note d referrer

The Department’s analysis determined that the federal Regulations would result in 29.4 Mt of CO₂e from the electricity sector for the 2025–2026 period. Saskatchewan intends to promulgate amendments to the Saskatchewan Electricity Regulations that will limit emissions in the sector to no more than 29.4 Mt over the 2025–2026 period. Therefore, ECCC concluded that there will be equivalent outcomes over this period.

To prepare for the transition from conventional coal-fired electricity, Saskatchewan has said that the province will need to make significant investments in non-emitting capacity to stay within its regulated caps and to meet its own 2030 target of up to 50% renewable generation capacity. This additional non-emitting generation capacity would continue to operate beyond 2030 and may reduce the amount of generation from natural gas-fired sources, which can further support GHG emissions reductions beyond 2029.

Air pollutant emissions

The federal Regulations establish a regime for the reduction of carbon dioxide (CO₂) emissions. As such, the determination of equivalent outcomes is made on the basis of GHG emissions and not air pollutant emissions. However, the air pollutant emissions impacts of continued coal use as a result of the proposed Order and proposed Equivalency Agreement were assessed qualitatively, using historical analysis.

Past modelling determined that standing down the federal Regulations could result in a low increase of sulphur oxides (SO_x) and nitrogen oxides (NO_x) emissions in the province of Saskatchewan. In previous analysis, conducted for the January 1, 2018, to December 31, 2029, period, the cumulative change in SO_x was expected to be a net increase of 37 kilotonnes (kt), while the cumulative change in NO_x was expected to be a net increase of 8 kt. These air pollutants are known to cause adverse human health impacts, through inhalation of directly emitted pollutants or via their transformation in the atmosphere to secondary particulate matter less than 2.5 microns in width (PM_2.5) and ground-level ozone. The health effects of these pollutants are well documented in the scientific literature and include an increased risk of various cardiovascular and respiratory outcomes, which lead to an increased risk of premature mortality.

The air pollutant emission reductions expected as a result of the 2012 federal Regulations totalled 1 156 kt SO_x and 546 kt NO_x across Canada over the 2015–2035 period. In comparison, the increase in air pollutant emissions in Saskatchewan resulting from standing down the federal Regulations under the 2019 equivalency agreement were considered to be low. The potential health impacts to Canadians associated with the increase in emissions from the Equivalency Agreement are therefore also expected to be low. It should be noted that Saskatchewan outperformed the federal Regulations from 2015 to 2017 due to its early installation of carbon capture and storage (CCS) at Boundary Dam 3 (BD3). Compared to a scenario without CCS, BD3 reduced SO_x and NO_x emissions in the province by an estimated 21.8 kt and 3.8 kt respectively between 2015 and 2017.

Objective

The objective of the proposed Order would be to declare that the federal Regulations do not apply in Saskatchewan in 2025 and 2026. The proposed Order would enable the continuation of planning and investment decision-making processes associated with an overall long-term strategy to reduce electricity sector emissions in Saskatchewan for the period up to and including December 31, 2026, while maintaining reduced administrative burden on industry and the federal government.

Description

The proposed Order, made pursuant to subsection 10(3) of CEPA, would suspend the application of the federal Regulations, made under subsection 93(1) of CEPA, in Saskatchewan, effective January 1, 2025. This proposed Order would include an expiry clause stating that the Order would automatically cease to have effect if the underlying equivalency agreement terminates or is terminated.

Regulatory development

Consultation

During the public comment period for the Regulations Amending the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations following publication in the Canada Gazette, Part I, public health organizations and environmental groups expressed concerns with equivalency agreements, as standing down the federal Regulations would mean that provincial coal-fired electricity plants may not close as early and therefore could lead to higher levels of air pollutant emissions. These concerns have been made public through the Pembina Institute’s report on equivalency agreements (PDF), published August 30, 2017. Similar concerns were also received during the public comment period for the amendments to the federal Regulations, published February 17, 2018.

The purpose of the federal Regulations is to establish a regime for the reduction of CO₂ emissions that result from the production of electricity by means of thermal energy using coal. The federal Regulations do not address air pollutants. While the Department recognizes that there would be some incremental increases in air pollutant emissions as a result of the proposed Equivalency Agreement, such increases are expected to be low. The proposed Equivalency Agreement and the proposed Order will both be published in the Canada Gazette, Part I, each with a 60-day comment period.

Bilateral meetings have been held with Saskatchewan government officials and with representatives from SaskPower, focusing on key policy and technical parameters used in support of the determination of equivalent outcomes.

Modern treaty obligations and Indigenous engagement and consultation

Continuing to stand down the federal Regulations by way of the proposed Order is not expected to have any incremental impact to Indigenous Peoples or to modern treaty obligations and therefore, no specific engagement was undertaken.

Instrument choice

The publication of an Order (i.e. a regulatory instrument) is the only mechanism through which CEPA-recognized equivalency agreements can be achieved. Accordingly, no other instruments were considered.

Regulatory analysis

Benefits and costs

The proposed Order would result in no incremental costs, as it would continue to stand down the federal Regulations in Saskatchewan. The benefit of the proposed Order would be to avoid inducing duplication of the administrative burden and departmental administrative costs when the present order expires. Additionally, in the absence of the proposed Order, two coal-fired units in Saskatchewan would need to take action to comply with the federal Regulations as of January 1, 2025, by either shutting down or meeting the federal performance standard (e.g. through retrofitting with new GHG emission control technology), as these units will have exceeded the end-of-life provisions in the federal Regulations. As such, the proposed Order would also avoid likely increased costs to Saskatchewan’s electricity supply and therefore associated increased consumer rates that would have resulted from such a scenario.

Small business lens

No small businesses would be directly affected by the proposed Order. Coal-fired electricity generation facilities that sell their electric output to the grid are owned by provincial utilities or large companies, with revenues in the hundreds of millions of dollars.

One-for-one rule

The one-for-one rule would apply to the proposed Order, constituting an “OUT” as per the Policy on Limiting Regulatory Burden on Business. However, those cost reductions have already been accounted for in the Regulatory Impact Analysis Statement for the previous order, which covered the 2020–2029 analytical period. Accordingly, no additional impact was assessed for the proposed Order.

Regulatory cooperation and alignment

In the spirit of regulatory cooperation and alignment, the proposed Order would avoid duplication of the regulatory burden where Saskatchewan has in place regulations that achieve equivalent outcomes to the federal Regulations.

Strategic environmental assessment

The Federal Regulations were developed under the Pan-Canadian Framework on Clean Growth and Climate Change. A strategic environmental assessment (SEA) was completed for this framework in 2016. The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy (FSDS) goal of effective action on climate change. A preliminary scan concluded that an SEA is not required for the proposed Order, since it would continue to align with the FSDS goals.

Gender-based analysis plus

The proposed Order would not increase any costs and would provide continuity to electricity unit operators in Saskatchewan. Therefore, no groups are expected to be disproportionately affected by the proposal.

Implementation, compliance and enforcement, and service standards

The proposed Order would declare that the federal Regulations do not apply in Saskatchewan effective January 1, 2025. Saskatchewan would provide the Department with annual GHG emissions and electricity generation data, as well as other information such as statistics on its enforcement actions concerning the Saskatchewan Electricity Regulations.

Contacts

Karishma Boroowa
Director
Electricity and Combustion Division
Environment and Climate Change Canada
351 Saint-Joseph Boulevard
Gatineau, Quebec
K1A 0H3
Email: ECD-DEC@ec.gc.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Environment and Climate Change Canada
200 Sacré-Coeur Boulevard
Gatineau, Quebec
Email: ec.darv-ravd.ec@canada.ca

PROPOSED REGULATORY TEXT

Notice is given, under subsection 332(1)^{footnote a} of the Canadian Environmental Protection Act, 1999 ^{footnote b}, that the Governor in Council proposes to make the annexed Order Declaring that the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations Do Not Apply in Saskatchewan, 2025 under subsection 10(3) of that Act.

Any person may, within 60 days after the date of publication of this notice, file with the Minister of the Environment comments with respect to the proposed Order or a notice of objection requesting that a board of review be established under section 333^{footnote c} of that Act and stating the reasons for the objection. Persons filing comments are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website. Persons filing comments by any other means, and persons filing a notice of objection, should cite the Canada Gazette, Part I, and the date of publication of this notice, and send the comments or notice of objection to the Electricity and Combustion Division, Energy and Transportation Directorate, Department of the Environment, 351 Saint-Joseph Boulevard, Gatineau, Quebec K1A 0H3 (email: ECD-DEC@ec.gc.ca).

A person who provides information to the Minister may also submit a request for confidentiality under section 313^{footnote d} of that Act.

Ottawa, June 21, 2024

Wendy Nixon
Assistant Clerk of the Privy Council

Order Declaring that the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations Do Not Apply in Saskatchewan, 2025

Declaration

Non-application

1 The Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations do not apply in Saskatchewan.

Cessation of Effect

Termination of agreement

2 This Order ceases to have effect on the day on which the agreement between the Minister of the Environment and the Government of Saskatchewan, entitled “Agreement on the Equivalency of Federal and Saskatchewan Regulations for the Control of Greenhouse Gas Emissions from Electricity Producers in Saskatchewan, 2025” terminates or is terminated in accordance with subsection 10(8) of the Canadian Environmental Protection Act, 1999.

Repeal

3 The Order Declaring that the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations Do Not Apply in Saskatchewan ^{footnote 2} is repealed.

Coming into Force

4 This Order comes into force on January 1, 2025.

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